DSGR

Business Context and Reporting Period

Company: Distribution Solutions Group, Inc. (DSGR)
Filing Type: Form 8-K (Current Report)
Date of Report: July 16, 2026 (Reporting event date: July 15, 2026)
Event: Entry into a Material Definitive Agreement (Agreement and Plan of Merger).

On July 15, 2026, Distribution Solutions Group, Inc. entered into a merger agreement to be acquired by affiliates of LKCM Headwater Investments, LLC. Upon completion, the Company will become a privately held subsidiary, and its common stock will be delisted from the Nasdaq Global Select Market.

Key Financial Metrics and Transaction Terms

Merger Consideration: $35.00 per share in cash for all outstanding shares of Company Common Stock (excluding shares held by Affiliated Stockholders, treasury shares, and shares subject to appraisal rights).

Financing Structure:

• Debt Financing: An amendment to the existing Credit Agreement allows revolving loans to fund the transaction. Borrowings to finance the merger are capped at $100,000,000 at any given time during the period between signing and closing. Interest margins range from 100 to 300 basis points (SOFR-based) or 0 to 200 basis points (Base Rate-based).
• Equity Financing: LKCM Headwater Investments IV, L.P. has committed up to $125,000,000 in equity to fund a portion of the transaction.

Termination Fees:

• Termination Fee (Company to Parent): $9,264,438 (payable if the Company enters into a Superior Proposal or changes its recommendation).
• Reverse Termination Fee (Parent to Company): $22,234,650 (payable if Parent fails to consummate the Merger due to breach or failure to close).

Equity Award Treatment: Vested RSUs and options will be cashed out based on the $35.00 merger price. Unvested RSUs will convert to cash-settled awards subject to original vesting schedules. Underwater options will be terminated for no value.

Material Changes and Governance

Ownership Structure: LKCM Headwater and its affiliates currently beneficially own approximately 79% of the Company's outstanding common stock. These "Affiliated Stockholders" will not receive the $35.00 per share cash consideration.

Board Action: A Special Committee of disinterested directors unanimously recommended the transaction as fair and advisable. The Board approved the agreement, subject to stockholder approval.

Stockholder Approval Requirements: The transaction requires:

1. Affirmative vote of a majority of outstanding shares entitled to vote.
2. Affirmative vote of a majority of votes cast by "disinterested stockholders" (excluding Affiliated Stockholders, non-Special Committee directors, and officers).

Outside Date: The Merger Agreement may be terminated if not consummated by December 31, 2026, unless extended.

Outlook, Risks, and Contingencies

Closing Conditions: The transaction is subject to customary conditions, including stockholder approval, expiration of the HSR Act waiting period, absence of legal injunctions, and no Material Adverse Effect occurring since the agreement date. Financing availability is not a condition to the Parent's obligation to close.

Key Risks:

• Failure to obtain requisite stockholder approvals or HSR clearance.
• Inability to secure debt financing under the Credit Agreement Amendment.
• Receipt of a Superior Proposal leading to termination fees or deal restructuring.
• Distraction of management and potential disruption to business operations during the pendency of the transaction.

Future Filings: The Company intends to file a Proxy Statement (Schedule 14A) and a Transaction Statement (Schedule 13E-3) containing detailed financial and legal information.

Investor Verification Checklist

• Proxy Statement Review: Verify the final terms, fairness opinion, and detailed financial data in the upcoming Schedule 14A and 13E-3 filings.
• Stockholder Status: Confirm whether your shares are held directly or through an affiliate of LKCM Headwater, as Affiliated Stockholders do not receive the $35.00 cash payout.
• Financing Certainty: Monitor the status of the Credit Agreement Amendment and the $125 million equity commitment to ensure funding conditions are met.
• Voting Rights: Understand the "disinterested stockholder" voting requirement and how it impacts the approval threshold.
• Equity Awards: Review specific treatment of unvested RSUs and options to determine cash settlement values and vesting implications.